Q : There is no doubt that your company is a real leader in your sector. Could you give to our readers a brief historical background of your company?
A : The company is established in 1907. Our company built more than 800 ships for about 30 countries. For the last couple of years we built ships for Germany, Italy, Greece, Norway, Poland, Malaysia, Singapore, England and of course, for Bulgaria. Varna Shipyard’s renovation was done at the end of 60’s and the beginning of
70’s. The technological lines are very similar to the most advanced shipyards in the world ; of course, some new shipyards have newer technologies but as a whole the technological process is very similar to them.
Q : What about the financial results of the company?
A : At the beginning of this year the situation was estimated and later on we were able to organise our selves to attract some fresh finances. I can give you now some numbers : in 1992 the turnover was about 40 million $ ; in 1993 it was 42 million $ ; in 1994 was 55 million $ ; 1995 - 63 million $ ; 1996 – 72 million $ ; in 1997 – 80 million $ ; and for the first 6 months of this year we have 72 million $ which is equal to the whole 1996. I think that we will triple the turnover this year. Of course, it depends how we would make our calculations for the balance sheets and the income and expenses. There are two options for us till the end of the year – either to have 105-108 million $ or to have 126-127 million $. The reason of this is that sometimes the ship owners prefer to have the ship on the 5-th of January but not on the 5-th of December because the ship is one year younger and this is very important for them for the relations with the classifications rows.
Q : When you were saying that you attracted fresh capital, where is it from? Only from Bulgaria …?
A : Not only from Bulgaria. For the first time in the history of Varna Shipyard, we started to work with international financial institutions. This is not because we are there probably but because of the situation now. We started working with them. There will be a leading bank in London. When you sign a shipyard contract, there are two financial tools : the first is the advance payments which are the money of the client and the second is the balance payment ; you have to be able to release the advance payments and later on to attract some capitals, to get some loans from the banks to finish the ship. Again for the first time this year in April, Varna Shipyard received the direct refund bank guarantee for releasing the advance payments from Berlin Bank, London which has never been done before. That is for two reasons – the key one is that the people which are working in the yard are 40-45 years old, all of them speak English and have their international connections and know how to communicate with the international financial institutions. Because of that for 6 months we managed to attract about 26 million $ fresh capital, which allows us to built us ships for the amount of 72 million $. In this type of business we have to be able to have loans to release the advance payments that means to have the refund bank guarantees about 55% , sometimes 60% of the turnover you have per year. Varna Shipyard has at the moment a full portfolio till the end of next year. At the beginning of this Autumn we will enter into other contracts. Of course, the crisis in South Korea and far East is not so pleasant for us. Because this is not a typical shipbuilding crisis. This is an economical crisis. In the middle of 60’s there was another crisis but it was purely a shipbuilding over-tonish crisis. Now this is not the case. But it is healthy time. A lot of ships are going to scrapping. That means that in two years the demand for building ships will be much higher. And second some shipyards will be bankrupted and closed because of lack of good orders. Now it is difficult time for orders but later on probably we will have less competitors.
Q : Concerning competition, what are your main advantages against your main competitors?
A : I think that we don’t have competitors in the Black Sea area. Varna Shipyard is the leader. Per year we deliver as much ships as the other Black Sea countries do all together. I don’t mean that the others are bad but that we do not have a real competition. The bigger competitors for us are Poland and Croatia. Croatia started to specialise more in the tankers, Poland in container ships, we stayed more in the carriers. That means that sometimes there is a mixture. We also build product carrier, in Croatia they also build containers and in Poland – carriers. This is the reason why we have orders from Polish ship companies. They come to Varna but not to Polish shipyards. Traditionally we have a very good market place in the field of bulk-carriers and in the multi-purpose ships. The big containers are going to the South China Sea, to the Caribbean Sea, to the Mediterranean Sea, to the Baltic Sea ; and then the small ships are serving the areas. We are doing the second one. The marketing is not so bad that we are doing. Of course, we need improvement. We try to do this with an extension of the portfolio. That means that we have to have at least ten types of ships which you are ready to design and build – mostly bulk-carries, tankers and multi-purpose ships and different tonnage. And with this portfolio we are trying to find the best time for the market. Probably the time is for tankers and we are doing our best to go there. Because for bulk-carriers the time is very bad at the moment.
Q : Are you looking for new markets?
A : Yes, and this is the reason I agreed to do the interview. First we have to do this for the country. If there are some good examples we have to show them. And second because we had our last order from USA in 1992 but from then on we did not have another. At the end of 60’s we had one from South America. This a new market for us. The Asian and European markets we try to cover but the American one is just known in some way for us. I personally have worked for McDermott International for three years. I know some of the American shipyards. In the USA there is not such big tradition in the widthshield ship building, you have a very good tradition in the navy of course but there still some ship owners that would come here. If the ship owners from Chile went to Croatia that means that it is possible that somebody else would come to Bulgaria.
Q : What efforts are making in that direction?
A : There are different ways of accessing such markets.
One of them is, probably, what you are doing at
the moment. The other one is at the world exhibitions
where you can find contacts. We were on a such a
month ago in Greece. In two months we are going
to Hamburg where is a world exhibition. The establishing
of the contacts with new markets takes time. But
to be successful next year you have to start now. |
Q : As we saying the USA – contacts often mean contracts. Our reader are always interested in new business opportunities. In which area in your activities are you interested to attract partners or investors?
A : You know that we are in the process of privatisation at the moment. In a couple of weeks the final bits have to be presented. We did already this attraction in some way. We were visited by some American investment funds. I hope that soon in 15-20 days we will make our mind. That means that you are a little bit late in this way but any way it is very pleasant to know that later on some others will come because we definitely will issue some shares. We will be probably the first company in Bulgaria that will issue the corporate bonds. It means that in production point of view Varna Shipyard needs some improvement but we have very good tradition ; people know how to build ships in general. From the financial point of view it was Tabula Raza – black table. Because before the changes the key problem for Bulgaria was to have the hard currency. They used to sell a ship for 12 million and the cost for it was 18 for example ; the government covered every thing, there was no need to go to the banks or international markets. Now the situation is different and this is the reason why I have to develop some other financial tools : like syndicated laws, like corporate bond, like the refund paying guarantees from the Western banks.
I am not so pleased of one of the Bulgarian laws – the banking capital law, the Bulgarian banks are allowed to give to the companies loans no more than 25% of their capital. Of course, this is normal all over the world. There might be places with even
10%. The International Monetary Fund is trying to force the banking sector to introduce this but it is impossible to be done. For example, the Bulgarian banks in the past we had
32 million, we cut for a year to 14 million which creates a lot of difficulties for us. I think it is not fair for the industry. It is killing it ; I do not like this decision no matter how important is IMF for Bulgaria. It has to be done in a longer term – 3 or 4 years, because in the area where we are working it takes at least a year to invite and to start working with a new bank or minimum 6 months. This is no like a business with a magic stick. We are not selling the bananas. The specialist in the banks in shipping are very few. In Bulgaria in the past we had such in only one bank. You couldn’t go to another one for a short period. This is impossible. And for this reason we hate this part of the law. But we have to live with this and we are trying to do our best to diversify the portfolio ; we are doing this but it is still a problem. And from this point of view I said that we are establishing new financial tool for us which is very important but it takes a lot of time and it is very painful. Because you are on the market, you have a good marketing, production, and the IMF cuts your finances – this is probably stupid but it is the real life. The normal way was to give us at least two years so we can diversify ; it is not only in Bulgaria - it is Norway, Japan, Poland or Germany. This is an inertial business. We build the ship for 12-14 months. The most gentle word is that we are not pleased because the export orientated industry of Bulgaria needs a good financial system. The politician just would like to make the IMF happy as soon as possible which, I think, in this case is wrong.
Q : Would you say that your company will be private till the end of the year?
A : Probably earlier. We are trying to do our best to have good financial partners because this is the key story for us. We hope that this will be a consortion between a financial institution and the management. It has not been decided yet. The 17-th of August is the final time to present the bits. It is going to be at least 85% private
Q : As a more global question, how confident are you in the future of this country?
A : I had the opportunities to live outside the country but I preferred to stay here, in Varna in particular, where is completely different from the rest of the country. The whole industry in Varna is export orientated ; there chemical plants, tourism, Bulgarian Merchant, Varna Shipyard and Port. Varna is probably the best kept city in the past and in the current. It is a nice place to live.
I am confident in Varna Shipyard otherwise I was not going to be a part of the consortion which will privatise the Yard. It is not healthy to do something you do not believe in, against your self.
I an not a politician. Probably you had enough confidence expressed from them. I believe that in Bulgaria with some mixture of international and Bulgarian management, we can do a lot. Because geographically it is a very good place. It much more pleasant to invest here in the nice whether than to go in place which is not difficult. In Bulgaria probably we are not so fast like Poland, for example, but sometimes this could be an advantage. The investor feel that you can stay in the EU longer and they could trust you a little bit more – not to be much flexible sometimes. And if we make good decisions in the privatisation period, I think that later on the real economy will help the politicians to grow up. Because now we have only a few good politicians, especially in the country, this is a very difficult process. The quality of politicians there still needs improvement very much. In Sofia, the top team is really open-minded and they are doing their best.
Q : Among all the state owned companies in Bulgaria, we can say that Varna Shipyard is a successful story. What is the secret of your style of management?
A : I don’t know , you have to ask the others. Some international experience probably is one of the secrets ; second is that I am making teams in different places I am working which for Bulgaria is not very typical. The jealousy in Bulgaria is very high because the people are very poor. This is why the Balkan Peninium has always had problems and it is the most poor place in Europe. This the reason why we have poorer people and more violence. Another problem of our country is that we have the wrong people on the right places.
Q : As a final issue keeping in mind that you are reaching 2.5 million readers, what would be your final message to them?
A : Come to Varna. This is the best place to invest and rest.
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BULGARIA, 
